Wells Fargo started off coverage on Chipotle Mexican Grill (NYSE:CMG) with an Overweight rating on its view the restaurant stock features best-in-class unit economics and ample growth drivers. The firm sees CMG as a levered recovery play and a core long-term holding for large cap growth investors.

In making the bull case on CMG, anayst Zachary Fadem and team pointed to top-tier economics, an arsenal of comparable sales growth levers and accelerating shareholder returns through buybacks.

“In the year(s) ahead, we see a stable growth algo of MSD%+ comps, +HSD% new units, and improving Restaurant/EBIT margins driving +DD% EPS growth. Shares trade -28% vs. historical means; input costs should moderate in 2023; and operations appear to be ‘normalizing’ vs. disrupted levels. Elasticity concerns appear priced in. Sentiment appears more mixed, but we see opportunity with headwinds priced in.”

The firm also thinks investor concerns on pricing elasticity for Chipotle (CMG) are priced in already. Notably, growth in the Mexican QSR part of the restaurant industry is forecast to outpace the sector average to support CMG/

Valuation is considered a reason to be cautious on CMG, but the stock is also noted to still trade below historical levels. Wells Fargo assigned a price target of $1,800, which works out to 34X the FY24 EPS estimate.

Shares of Chipotle (CMG) traded flat in premarket trading on Tuesday at $1,597.50.

Read the latest breakdowns of Chipotle from Seeking Alpha authors.